Regulatory reforms by SEC urged by good governance advocate in “Executive Share Option Schemes”
View(s):Good governance advocate Chandra Jayaratne recently wrote to the Securities and Exchange Commission of Sri Lanka (SEC) offering suggestions for regulatory reforms covering the operation of Executive Share Option Schemes in Sri Lanka.
Referring to recent reports on the benefits of a share option that accrues to directors of John Keells Holdings (JKH), Mr. Jayaratne said in a letter, released to the media among other groups, that the SEC should appoint a committee comprising multi disciplinary professionals and multi stakeholder representative, to review and report on various points that he has suggested.
He said the committee should consider:
1.Whether Share Option Schemes of the type, structure, operation, and options as referred to in the news media report, in application as a part of Executive Compensation by Listed Companies operating in Sri Lanka, within the currently applicable Company Law, Governance, market supervision, codes of conduct and enforcement framework, are appropriate and beneficial to and in the interest of all stakeholders in the longer term?
2. If such schemes are to be promoted in Sri Lanka, whether the present Laws, Regulations, Disclosure Requirements, Market Supervision, Codes of Conduct and Enforcement schemes are adequate to ensure the sustainable beneficial interests of all stakeholders?
3. Whether such schemes can be abused by key Executive Option holders for their personal benefit and lead to market manipulations, conflicts of interests and promote undesirable related party / financial transactions?
4. If such schemes are to be retained in operation in Sri Lanka, in the interests of all stakeholders, whether the relevant key executives and their related parties should be prevented from trading in their holdings of company shares for a specified period of at least 2-3 years before and after exercise of such options?
5. If such schemes are to be retained in operation in Sri Lanka, in the interests of all stakeholders, whether new/revised good governance expectations led Codes of Best Practice and Codes of Ethical Conduct should be in place, with an effective compliance process, self declarations, independent monitoring schemes and transparency via independent financial media?